VUG vs. VO: What’s The Difference?

The Vanguard Growth Index Fund ETF Shares (VUG) and the Vanguard Mid-Cap Index Fund ETF Shares (VO) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and VO is a Vanguard Mid-Cap Blend fund. So, what’s the difference between VUG and VO? And which fund is better?

VUG and VO have the same expense ratio: 0.04%. VUG also has a higher exposure to the technology sector and a lower standard deviation. Overall, VUG has provided higher returns than VO over the past ten years.

In this article, we’ll compare VUG vs. VO. We’ll look at fund composition and performance, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss VUG’s and VO’s annual returns, industry exposure, and holdings and examine how these affect their overall returns.

Summary

VUG VO
Name Vanguard Growth Index Fund ETF Shares Vanguard Mid-Cap Index Fund ETF Shares
Category Large Growth Mid-Cap Blend
Issuer Vanguard Vanguard
AUM 165.53B 154.08B
Avg. Return 17.58% 14.34%
Div. Yield 0.57% 1.23%
Expense Ratio 0.04% 0.04%

The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.

The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.

VUG’s dividend yield is 0.66% lower than that of VO (0.57% vs. 1.23%). Also, VUG yielded on average 3.24% more per year over the past decade (17.58% vs. 14.34%). VUG and VO have the same expense ratio: 0.04%.

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

VUG vs. VO - Industry Exposure

VUG VO
Technology 39.05% 22.01%
Industrials 5.13% 11.92%
Energy 0.32% 3.82%
Communication Services 16.49% 5.61%
Utilities 0.0% 5.12%
Healthcare 8.09% 13.03%
Consumer Defensive 2.41% 3.25%
Real Estate 2.46% 8.67%
Financial Services 6.75% 11.08%
Consumer Cyclical 17.78% 12.12%
Basic Materials 1.52% 3.36%

The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.

VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.

VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.

VUG is 17.04% more exposed to the Technology sector than VO (39.05% vs 22.01%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 5.66% higher and 10.88% higher respectively (17.78% vs. 12.12% and 16.49% vs. 5.61%). In total, Energy, Basic Materials, and Consumer Defensive also make up 6.18% less of the fund’s holdings compared to VO (4.25% vs. 10.43%).

Holdings

VUG - Holdings

VUG Holdings Weight
Apple Inc 10.13%
Microsoft Corp 9.52%
Amazon.com Inc 6.88%
Facebook Inc Class A 3.89%
Alphabet Inc Class A 3.43%
Alphabet Inc Class C 3.22%
Tesla Inc 2.44%
NVIDIA Corp 2.21%
Visa Inc Class A 1.78%
PayPal Holdings Inc 1.6%

VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.

Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
Marvell Technology Inc 0.68%
IQVIA Holdings Inc 0.68%
Chipotle Mexican Grill Inc 0.63%
Veeva Systems Inc Class A 0.62%
Digital Realty Trust Inc 0.62%
Centene Corp 0.62%
Aptiv PLC 0.62%
Carrier Global Corp Ordinary Shares 0.61%

VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.

Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

VUG VO
Mean Return 1.44 1.14
R-squared 92.48 92.22
Std. Deviation 14.76 15.65
Alpha 1.81 -2.71
Beta 1.04 1.11
Sharpe Ratio 1.13 0.83
Treynor Ratio 16.13 11.32

The Vanguard Growth Index Fund ETF Shares (VUG) has a Alpha of 1.81 with a Beta of 1.04 and a Treynor Ratio of 16.13. Its Standard Deviation is 14.76 while VUG’s R-squared is 92.48. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Mean Return of 1.44.

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Mean Return of 1.14 with a Beta of 1.11 and a Alpha of -2.71. Its Treynor Ratio is 11.32 while VO’s Standard Deviation is 15.65. Furthermore, the fund has a Sharpe Ratio of 0.83 and a R-squared of 92.22.

VUG’s Mean Return is 0.30 points higher than that of VO and its R-squared is 0.26 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than VO. The Alpha and Beta of VUG are 4.52 points higher and 0.07 points lower than VO’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Gemini - the simplest and cheapest broker I've found! Click here to read more (link to Gemini).

Performance

Annual Returns

VUG vs. VO - Annual Returns

Year VUG VO
2020 40.16% 18.22%
2019 37.26% 31.04%
2018 -3.32% -9.21%
2017 27.8% 19.25%
2016 6.13% 11.23%
2015 3.32% -1.34%
2014 13.62% 13.76%
2013 32.38% 35.15%
2012 17.03% 15.98%
2011 1.87% -1.96%
2010 17.11% 25.57%

VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% respectively.

The year 2013 was the strongest year for VO, returning 35.15% on an annual basis. The poorest year for VO in the last ten years was 2018, with a yield of -9.21%. Most years the Vanguard Mid-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2012, and 2020, when gains were 13.76%, 15.98%, and 18.22% respectively.

Portfolio Growth

VUG vs. VO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VUG $10,000 $54,735 17.58%
VO $10,000 $40,404 14.34%

A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.

With a $10,000 investment in VO, the end total would have been $40,404. This equates to a $30,404 profit over 11 years and a compound annual growth rate (CAGR) of 14.34%.

VUG’s CAGR is 3.24 percentage points higher than that of VO and as a result, would have yielded $14,331 more on a $10,000 investment. Thus, VUG outperformed VO by 3.24% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply